- The Aussie dollar came under renewed selling pressure on Wednesday, moving back towards multi-year lows against the greenback.
- Weak economic data and an abrupt selloff in US stocks at the end of the session weighed on investor sentiment.
- The economic calendar is quiet in Asia. It could be a tough session for risk assets given some of the moves seen overnight.
Risk sentiment deteriorated further on Wednesday, dragging the Australian dollar back towards multi-year lows against the greenback.
Here’s the scoreboard as at 8am in Sydney.
AUD/USD 0.7061 , -0.0023 , -0.32%
AUD/JPY 79.25 , -0.41 , -0.51%
AUD/CNH 4.9029 , -0.0127 , -0.26%
AUD/EUR 0.6198 , 0.0023 , 0.37%
AUD/GBP 0.5483 , 0.0026 , 0.48%
AUD/NZD 1.0823 , 0.0011 , 0.10%
AUD/CAD 0.9216 , -0.0053 , -0.57%
After beginning the session at .7084, the AUD/USD ventured as high as .7106 in Asian trade, helped by a recovery in Chinese stocks after they fell heavily on Tuesday. However, as European markets opened the Aussie began to slide, undermined by some worrying data out of the Eurozone with private sector activity growing at the slowest pace since September 2016, according to IHS Markit’s latest “flash” Composite PMI.
That result saw the euro fall heavily, helping to boost the greenback against most major currencies, including the Aussie dollar.
Steep declines in US stocks at the end of the session and weak new home sales data from the US, did little to help the Aussie’s cause, seeing the AUD/USD close at .7058, the lows of the day.
“Concerns that earnings growth may be peaking against an unsettled global backdrop and that fiscal stimulus will wane continued to weigh on sentiment,” said strategists at ANZ Bank. “Weak European PMIs and US housing data didn’t help.”
Against the crosses, the Aussie put in a mixed performance, climbing against the euro and British pound but finishing sharply lower against the Japanese yen and Canadian dollar.
Like the greenback, the yen benefited from safe-haven flows. The Canadian dollar was helped by hawkish comments from the Bank of Canada (BoC) following its October monetary policy meeting.
As expected, the BoC raised its key overnight interest rate by 0.25% to 1.75% — the fifth tightening in the current cycle — and indicated that it may speed up the pace of rate increases in the period ahead.
“The BoC removed the guidance that future rate hikes will be gradual and instead highlighted that ‘the policy interest rate will need to rise to a neutral stance’,” said Elias Haddad, Senior Currency Strategist at the Commonwealth Bank.
“The BoC’s neutral rate estimate is between 2.50 3.50%.”
The hawkish rhetoric helped the loonie outperform against all of the major crosses.
Turning to the day ahead, it looks set to be another tough session for the Aussie given the likelihood the moves in European and US stocks will extend into the Asian trade today.
Given the themes seen in recent months, the performance of Chinese markets will likely determine just how bad the day will be. They’ll resume trade from midday AEDT.
On the data docket, New Zealand trade data and Q3 GDP from South Korea are the only releases of note in Asia.
Later in the session, other highlights include German consumer and business confidence along with durable goods orders, jobless claims, wholesale inventories, pending home sales and the Kansas City Fed manufacturing index from the United States.
On the central bank front, the main highlight comes from Europe with the ECB announcing its October monetary policy decision at 10.45pm AEDT.
“The ECB is expected to repeat its forward guidance signalling net asset purchases will conclude this December and rates will remain on hold ‘at least through the summer of 2019,” said Westpac’s FX strategy team.
“A focus of Draghi’s press conference will be the ECB’s assessment of risks relating to the Italian budget.”
FOMC members Mester and Brainard are also scheduled to speak.
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